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Archive for February, 2012

Keep Spirits Nutty

I have not spent a lot of time in Austin, Texas, but I like the slogan:  Keep Austin Weird. I am thinking about this today because, quite often, it occurs to me that the alcohol beverage industry, similarly, seems to draw more than its fair share of eccentrics. In my view, that’s a good thing and helps make it a fun place to spend a career.

I am thinking about the distiller who lit his finger on fire in the office, to make sure we understand that his product is the real deal.  I am thinking about the client who owns a small island in the Caribbean, and once ditched his Rolls-Royce by the side of the road to sail around the world with a monkey. I am thinking about the Tequila importer who said 20 minutes was more than enough time to get across town, to our front section seats at Madison Square Garden, for Elton John’s 60th birthday concert.  (Little did I know that he’d park his big Mercedes at the adjacent curb and scurry up a back-alley entrance, midway through President Clinton’s introduction.)  I am also thinking about the beer executive who wore a green leisure suit, all day, on St. Patrick’s Day a while back.

It would not be better, if everything were plain like a Safeway-brand Vodka. In this spirit, I look forward to raising up a glass of Dumante Pistachio Liqueur — a nutty spirit indeed. A Louisville publication explains that David Dafoe, a “beverage architect” is one of the forces behind this unconventional product, along with lawyer-and-pistachio-devotee Howard Sturm. The Louisville article further explains:

Dafoe apparently is creating Epicenter, a center/distillery/entertainment complex where you can watch booze being made and bottled, then buy the first products made in downtown Louisville since Prohibition started 93 years ago. … For more than 20 years, Flavorman has been proud to be the beverage development partner for premier companies across the United States,” said Dafoe. … The Epicenter is part of a growing national trend toward artisan distilleries. While there were 143 distilled spirits plant licensees in the United States in 2006, there are now over 700.

We look forward to meeting the next fun and eccentric clients, and working with them to keep beer, wine and spirits off-centered — or nutty — or anything but boring.

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Cool Bottles

I am glad we are not stuck in this era. Work would not be fun.

Many years ago, TTB/ATF contemplated putting such shackles on the alcohol beverage industry, with a proposal to ban “non-standard containers.” This old chestnut (from about 1999):

proposes to “standardize” the appearance of all alcohol beverage containers. The proposal would accomplish this by prohibiting “Any container that, by virtue of the material from which it is composed or by its shape or design, or that by its ordinary and customary use is likely to mislead the consumer as to the alcohol character of the product. . . .” The proposal expresses ATF’s concern about containers that might confuse consumers about the presence or absence of alcohol in any form. The proposal secondarily expresses concern about containers that might confuse consumers, regulators and the trade about the “alcohol character of the product.” This part of the rule could conceivably be used to prohibit a malt beverage from being packed in a container that looks like a wine bottle, or a distilled spirit cooler from being packed in a container that looks like a beer bottle.

I am delighted to report that this proposal got buried not too many years apart from when one of its foremost proponents got buried. We might otherwise be deprived of all these great ideas that make the industry more competitive, modern, vibrant and fun. A good and further example is Double Agent, as above (approved at Bendistillery, an excellent contract bottler for spirits in Bend, Oregon). The outer chamber is vodka and the inner chamber is liqueur. I am pretty sure nobody will mistake it for a juicebox. Another good example, along these lines, is Milagro Romance Tequila.

Don’t hold your breath, but if we get really creative, perhaps it would only take a few more decades to identify good reasons why this sort of thing should be prohibited (preferably well after the government is running big surpluses, unemployment is below 3%, and other priorities are well under control).

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From IRS to ATF to TTB to What?

We are starting to get a lot of questions about TTB’s future. Over the years I have marveled and wondered if Bill Clinton or George W. Bush spent much time pondering the fate of ATF or TTB (and, for example, the intricacies of the label approval process). Well, the Obama Administration clearly thinks about it a lot. Late last year, Wine & Spirits Daily wrote:

Obama’s Office of Management & Budget (OMB) is considering “the impact of folding TTB’s tax enforcement and collection functions into IRS, to be proposed in the Budget and implemented in FY 2013,” reports Kane’s Beverage News Daily. The TTB has until Dec 28 to submit a proposal to the OMB “analyzing the feasibility and appropriateness of this proposal, including a discussion of how the missions and goals of these two agencies could be combined.” Furthermore, TTB is to review whether its “regulatory and health-safety functions” can be transferred to the IRS or even the FDA.

Since then, there has been almost nothing in the press about this important story. As recently as today, Google News has not much of any consequence on this issue. I don’t see much on TTB’s website or newsletters. A few days ago, however, The Gray Report set forth some new information on this topic, and it provoked a lively discussion in the comments. W. Blake Gray wrote:

The politics of this potential elimination of the TTB are fascinating, and ultimately why I don’t think it will happen even if Obama wants it. … In this climate where government austerity is seen by many as a good thing, Obama could gain some chips by trying to eliminate a federal agency. … However, the Republicans in the House seem dead-set on preventing him from achieving anything at all, and that will only intensify leading up to November. I think they’ll reflexively oppose it. … But what a conflict it poses philosophically for Republicans. Deregulation is a party tenet — but how would social conservatives react to restrictions being taken off of Demon Rum?

The 2013 Federal Budget is set to be released in a week. According to The Washington Post, “The budget is traditionally released on the first Monday in February — which is Feb. 6 — but the administration has pushed the release to Feb. 13.” Last month, Wine & Spirits Daily wrote:

The TTB has since submitted a plan analyzing the proposal to the Office of Management & Budget, but nothing is public or final at this point. … There are two current speculations as to how the reorganization would go down. One, the organization and all of its functions would be taken in one lump sum and deposited into a corner of the IRS. Two, the TTB’s tax enforcement and collection function could go to the IRS, while its regulatory and health-safety functions could go to the FDA. This is the most extreme scenario. One thing that almost everyone agreed one, however, is that an united alcohol beverage industry has enough power to squash any such proposal if it indeed made its way to Congress.

At least with the TTB the industry is the priority. With the FDA you’re with 25 or 30 other industries.” Even more problematic is that the FDA may have some anti-alcohol types, whereas the TTB is a neutral force.

One of the biggest complaints last year was the TTB’s slow response time when it came to approving labels – a result of less funding by Obama and inevitable lay-offs. As a remedy, the TTB proposed shifting its duties more towards enforcement rather than label pre-approvals, but the industry fought it. Instead, it seems the industry would rather the TTB speed up the COLA process than do away with it.

[I]t doesn’t seem likely that disbanding the TTB would save much money because theoretically it would require the same amount of people to complete the same functions now performed by the TTB, which “is pretty bare bones as it is.” Furthermore, the “TTB is one of the few revenue generating agencies in the federal government. They make a lot of money. It would be hard to split it up effectively.”

Three years ago, as part of the 2010 Budget, the Obama Administration flirted with the idea of imposing user fees for various TTB activities, and not much came of it. In our opinion, to the extent this is some kind of business school-type exercise, or thought experiment (as in, show cause why there should not be a shakeup), it could be useful. But, if any reorganization would take several hundred people from one entity and replace them with a similar number at one or more other entities, it is hard to imagine that the costs would not outweigh the benefits.

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